Retail Therapy

Google intends to open a large retail store in the hip Fulton Market district of Chicago, according to reports. This hasn't been confirmed by Google, but the move would make sense as its list of hardware products and services keeps growing, and as it pushes to establish Google Assistant as the dominant voice assistant.

This wouldn't just be a store-within-a-store experience or a seasonal pop-up shop, where the company can show off its latest flagship smartphones to passers-by. Instead, we believe that this is the first step in a longer-term plan for Google to redefine its brand. The company has a strategy to evolve beyond search and no longer wants its hardware business to appear as a side hobby.

Google is expected to release the third generation of its Pixel line of smartphones in October 2018, and as other major hardware makers have done, artificial intelligence will become a central theme of the upcoming release. The company has the opportunity to exploit integration of its smart assistant in an array of hardware products including its own alarm systems, cameras, doorbells, laptops, smartphones, speakers, virtual reality headsets and thermostats. Furthermore, Google's partners have put its artificial intelligence talents to use in a broad range of other hardware such as cars and TVs.

Google and its subsidiaries also offer a series of subscription services including music and video content, home monitoring, mobile and Internet-based phone services as well as storage. It's a lot to pull together and there are many ways the company can create an ongoing relationship with customers beyond free, ad-supported services.

Taking control of its experience centres would allow Google to showcase what can be described as the "Google way of living", with Nest- and Google-branded devices and software integrated into all domains of life. Since its major reorganisation in 2015, when the Alphabet mothership was created, Google executives have been looking to place more responsibility on more of its units to generate profit. Earlier in 2018, the Nest sub-brand was merged with Google's other hardware groups, creating a visible reporting unit that now needs to prove itself.

Although Google looks set to start its retail push with a store in the popular meat-packing district of Chicago, we expect the company to set up storefronts in other trendy urban locations including somewhere close to its New York offices in Manhattan and near Silicon Valley. These are among the most expensive retail locations in the world, but Google needs to redefine its image among younger audiences, pushing its ecosystem ahead of Amazon's.

Google has one of the most valuable and recognisable brands in the world, but there's no guarantee of success in the retail world and the company will have to show patience and account for the intangible benefits of having a bricks-and-mortar operation. This also means gaining a deeper understanding of consumers in physical retail environments.

Google would be joining a host of other giants, including Amazon, Apple, Microsoft and Samsung, that have established or are in the process of building some sort of retail presence.

As it expands its retail business, Google will have to be cautious how it deals with mobile operators. In the US, Verizon is the only carrier to sell its Pixel smartphones, but this could change in the coming months. Other important partners include Bell and Telus in Canada, Telstra in Australia, EE in the UK and Deutsche Telekom in Germany. Google needs to maintain its partnerships given the importance of carrier channels to the smartphone business.

As a shop owner, Google will change the chemistry of its organisation. It will take on new employees with different skills. Salesmanship will be a new type of service that Google will need to master.